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Prediction: Crude Oil Prices Have Bottomed Out

Not serious. Really. I get a chuckle when people post charts with Fibonacci and Gann lines all over the place. It makes stock market prediction look a little like numerology.

My prediction: oil prices are at or near their bottom and will start to rise slowly over the next few months.

And if you’ve been following along on my blog, you know until recently I was shorting oil via an ETF with much gusto and vigor. When it finally stopped out, it was both a relief because the market stopped wobbling, and a delight because of the returns I got on my investment.

One thing that kept me confident that oil prices would keep falling was that just about every day some analyst on Seeking Alpha would post a very reasoned and detailed treatise on why oil couldn’t possibly fall any further. “It can’t go below $50!” cried the analysts. “So it’s going to $40” I thought. The universe loves nothing better than to prove predictions wrong.

So what changed?

Horror movie opening scene: the young couple walk through the dark woods, when the man stops and says:“Baby, do you hear that?”“What? I don’t hear anything.”“That’s just it. It’s TOO quiet.”

It got quiet. Too quiet. The prognosticators stopped saying oil couldn’t fall any further. After many months of being proved wrong, they finally threw in the towel.

And now, tentatively, a few analysts dip their toes in the bearish water and say – so quietly you can barely hear them – that oil could in fact fall further.

And so bull markets are born.

Disclosure: I’m long XLE, which is an energy ETF. Not oil per se, but oil-ish. The energy sector (according to Jay Kaeppel) tends to be bullish between February and May. That, coupled with my tongue-in-cheek method of predicting the oil bottom (not an oily bottom, mind you), is good enough for me.